Chinese Yuan Drops Most in Almost Two Months as Dollar Rebounds

Oct. 12 (Bloomberg) -- China’s yuan declined the most in
almost two months as the central bank set the reference rate
weaker for the first time in three days after the dollar
rebounded against the euro and the yen.

The People’s Bank of China set the central parity rate at
6.6775 per dollar, compared with 6.6732 yesterday. The U.S.
Dollar Index traded on ICE Futures in New York, which tracks the
greenback against currencies of six trading partners, has gained
0.5 percent this week.

“The yuan’s decline is mainly caused by the dollar’s
temporary strength in the overseas market,” said Zhao Qingming,
a senior analyst in Beijing at China Construction Bank Corp.
“There is a high correlation between the yuan and the dollar’s
broad movement.”

The yuan dropped 0.08 percent, the most since Aug. 23, to
6.6734 per dollar as of 5:30 p.m. in Shanghai, according to the
China Foreign Exchange Trade System. The currency has gained 2.3
percent this year.

China wants the yuan to appreciate “in a gradual way”
instead of a sharp revaluation that may hurt the economy,
central bank Governor Zhou Xiaochuan said on Oct. 8. The nation
scrapped the currency’s dollar peg on June 19 after keeping it
steady for almost two years to help exporters cope with the
global financial crisis. The central bank has managed the yuan
against a basket of currencies that includes the euro, the yen
and the British pound since July 2005.